A little piece of England came to China this week. On Mar. 27, the classic British brand MG Rover began production in Nanjing, in Jiangsu Province, with 1.8-liter and 2.5-liter MG7 sedans and a 1.8-liter MG TF roadster rolling off a Chinese factory line. Next up will be other MG nameplates with engine sizes ranging from 1.1 to 1.6 liters, says Nanjing Automobile Group, the new owner of the once-iconic British brand. Unlike other Chinese auto companies that have either partnered with foreign auto companies or developed their own brands, Nanjing Auto is taking “a third path” aimed at creating an internationally competitive auto player, said Chairman Wang Haoliang on Mar. 27, according to the China Daily. The company has ambitious plans to spend $2 billion, which include the opening of a factory in Ardmore, Okla., next year in a bid to crack the world’s biggest auto market…

And the Chinese car companies are not content to stay at home. Hefei (Anhui Province)-based Chery, which produces the popular minicar the QQ on the mainland, recently signed a deal with DaimlerChrysler that will see it produce Dodge-brand vehicles for the U.S. and Western Europe markets. Shenyang-based Brilliance Automotive, which has a joint venture producing BMWs with the German company in northeastern China, showed three new models at the Geneva Auto Show this month. Those included a sporty sedan called the BS6, a BS4 compact, and a two-door BS3 coupe, all of which it aims to sell in Europe…

Despite those inroads abroad, cracking developed Western markets certainly won’t be easy. One huge challenge will be breaking into distribution channels and convincing overseas customers to trust Chinese autos. Chinese car companies have an often-deserved reputation for being more concerned with cost cutting than building high-quality, innovative vehicles. “The weak foundation of the Chinese car industry still makes it difficult for China to produce a car of decent quality and safety level,” cautions Beijing-based auto analyst Jia Xinguang.

Indeed, even succeeding at home is a challenge in the highly competitive, cutthroat Chinese auto market. So Nanjing Auto has asked Beijing for loans and subsidies totaling close to $400 million to fund its big plans to sell the Rover in China and overseas. Whether or not Beijing provides that major handout, though, MG Rovers will soon be tooling the roads of China.

Sustainable competitive advantage. U.S. Consumers would be attracted by the relatively cheap prices of Chinese automobiles, but what else can these cars offer to differentiate themselves from other established brands?

China could potentially defeat the United States in a future military conflict over Taiwan by using strategies designed to limit U.S. military access to the area, according to a report issued today by the RAND Corporation.

The report examines scenarios in which China might employ what are known as “antiaccess” strategies – actions that would impede the deployment of U.S. forces into a combat zone, limit the locations from which American forces could operate, or compel the U.S. military to conduct operations farther from the conflict than it would prefer.

RAND researchers have identified a number of measures that U.S. forces can take in order to neutralize possible antiaccess strategies. These include: deploying air and missile defense systems near critical facilities; moving vulnerable ships out of port at the first sign of conflict; and reducing vulnerabilities in communications and computer systems…

The study says potential Chinese antiaccess strategies include:

1. Pressuring American allies such as Japan to limit or deny the United States the use of bases on their territory in a conflict.

2. Striking or jamming information and computer systems to delay the deployment of U.S. military forces or to deny the United States access to information about enemy locations.

3. Disrupting U.S. logistics systems to prevent the timely delivery of supplies and delay the arrival of critical reinforcements.

4. Attacking air bases and ports to prevent or disrupt an influx of forces and supplies.

5. Attacking naval assets to limit the U.S. ability to launch aircraft from the sea.

“The net result of these strategies is that China could actually defeat the United States in a conflict — not in the traditional sense of destroying the U.S. military, but in the sense of China accomplishing its military and political objectives while preventing America from achieving some or all of its objectives,” Cliff said.

“The Chinese People’s Liberation Army is well aware of its own shortcomings and the United States’ military superiority,” Cliff said. “Instead of engaging U.S. forces head-on, they would attempt to take advantage of what they perceive to be American weaknesses – including the need to deploy and operate forces thousands of miles from home…”

Regarding claims by some countries that Taiwan was using aid to win St Lucia ‘s recognition, thus prompting China to hike its aid and resulting in dollar diplomacy, Wang said many Western countries did the same thing, so it was unfair for them to criticize Taiwan. “Our foreign assistance is supervised by the parliament and is transparent,” he told CNA…

Chinese Ambassador Gu Huaming lodged a protest with St Lucia, saying its receiving the Taiwan delegation was totally unacceptable to the government and people of China. Taiwan has been seeking to restore diplomatic ties with St Lucia, which has recognised China since the return to power of the Caribbean nation’s opposition leader Compton in December 2006.

Compton, 82, leader of the United Workers Party and the so-called father of St Lucia’s independence from Britain in 1979. He led St Lucia for 29 years, between 1964 and 1979 and again from 1982 to 1996. Under his rule, St Lucia opened diplomatic ties with Taiwan in 1984 but cut ties in order to recognize China in 1979, when Kenny Anthony became prime minister.

Now that Compton is back in power, there seems to be willingness from both St Lucia and Taipei to resume ties, causing China to take steps to protect its current diplomatic relationship. China recently pledged more aid, including offering to help build an industrial zone and a sports stadium, in a bid to match Taiwan’s offer of aid.

If St Lucia resumes ties with Taiwan, it will be the 25th country to recognize Taiwan, formally known as the Republic of China. Some 170 countries recognize China or the People’s Republic of China and see Taiwan as its breakaway province. While Taiwan accepts the dual recognition of both Taipei and Beijing by foreign countries, China upholds a “one-China” policy and cuts ties as soon as a foreign ally has opened ties with Taiwan.

Dollar diplomacy is the only way for Taiwan to survive internationally and maintain its legitimacy as a country. I don’t see how this problem can be solved in the near future. As long as China upholds it one-China policy, Taiwan will have to resort to paying for friends.

Despite China’s one-China policy, there is some truth to Taiwan’s assertion that China is the one pushing the island towards formal independence. If Taiwan was able to maintain its international presence as the Republic of China, there most likely wouldn’t even be a Taiwan Issue today. Only after Taiwan began to lose its diplomatic allies to the PRC did most Taiwanese start to ask themselves, “If the world recognizes the PRC as China, yet we are not part of the PRC, so does that mean Taiwan is not part of China?” This mindset led to the reemergence of the Taiwanese identity, which has been strongly reinforced by China’s military threats and the conspicuous manner in which the PRC goes about degrading the status and image of Taiwan within the international arena.

In reality and for all practical matters, the relationship between the ROC and PRC is analogous to the relationship between the two Koreas, namely the ROK and DPRK. Despite the presence of two Koreas and the hostilities that exist between them, the two sides agree that there is in essence only one Korea and that the two countries would ultimately be reunified. Both sides still claim sovereignty over the territory administered by one another and have no official diplomatic relations, yet both enjoy international diplomatic recognition. If such an arrangement can work for the two Koreas, why can’t there be two Chinas? Plus, what good is the one-China policy when it clearly has the opposite effect?

A senior engineer for a company with numerous American Navy contracts, Chi Mak, 66, is charged with attempting to smuggle designs for quiet submarines to China and with acting as an unregistered agent of China in America. Four other members of Mr. Mak’s family face similar charges and are expected to be tried separately at a later date.

The alleged ring was broken up in 2005 when agents intercepted two of the family members at Los Angeles airport preparing to board a flight to Hong Kong. According to the government, hidden in their carry-on bag, in a package of CDs for learning English, was a disk containing sensitive, encrypted data on quiet propulsion systems for submarines.

Mr. Mak, a naturalized American citizen born in China, has pleaded not guilty. “My client’s character is absolutely unblemished,” a defense attorney, Ronald Kaye, said.

A spokesman for the Office of the Counterintelligence Executive, Ross Feinstein, said China is considered one to have one of the world’s most active espionage programs, along with Russia, Iran, and Cuba. “China is at the top of our concerns,” Mr. Feinstein said…

Jurors are expected to see excerpts from audio and video surveillance of the suspects, including a camera placed over Mr. Mak’s dining room table. After a defense request, the government has agreed not to play for jurors certain inflammatory statements Mr. Mak allegedly made on the tapes, including claims that America brought terrorist strikes on itself and that North Korea has the right to develop nuclear weapons.

Jurors are expected to see excerpts from audio and video surveillance of the suspects, including a camera placed over Mr. Mak’s dining room table. After a defense request, the government has agreed not to play for jurors certain inflammatory statements Mr. Mak allegedly made on the tapes, including claims that America brought terrorist strikes on itself and that North Korea has the right to develop nuclear weapons. Judge Carney has ruled that jurors may hear that, decades ago, Mr. Mak recorded the comings and goings of American warships in Hong Kong harbor in a logbook he kept. Jurors also may hear about torn-up notes allegedly found in Mr. Mak’s home that prosecutors contend are a Chinese government shopping list for information on missile defense, artillery, and torpedo systems. The prosecution also may play a recording suggesting that Mr. Mak was part of “the red flower of North America,” a term prosecutors claim is code for a Chinese intelligence operation…

Chi Mak’s attitude towards the U.S. isn’t all that surprising. After all, he’s only a first generation immigrant. Imagine moving to a new country, hoping for a fulfilling life and living the American dream, but end up being stuck in middle management for most of one’s career and then blaming it on the corporate “glass ceiling.” I’m not sure if Mr. Mak fits this profile exactly if at all but those Chinese-Americans who do fall into this category often become rather bitter, especially when they compare their lives with those of their friends and family who stayed behind and prospered. Such individuals would be easy targets for recruitment by Chinese intelligence agencies. However, their motivation would be to prove their worthiness and bring meaning back to their lives rather than true patriotism.

The school where the Chinese Communist Party trains its officials is set to publish a textbook on combating corruption, state media has said. The book will be the “first systematic, formal and exclusive textbook” against graft in the school’s history, a director told the China Daily. Work on the book began after President Hu Jintao called for better education on the issue in a speech in December.

The Communist Party views corruption as one of its most serious challenges.

The authorities have warned that the levels of graft are now so high that they might even threaten the party’s rule. China’s top prosecutor, Jia Chunwang, told lawmakers earlier this month that nearly 30,000 officials had been indicted on corruption charges in 2006.

In one of the most high profile cases, Shanghai’s Communist Party chief, Chen Liangyu, was sacked after being implicated in the misuse of Shanghai’s 10bn yuan ($1.29 bn) pension fund. The country’s top statistician has also lost his job over graft allegations, along with the organiser of China’s Formula One racing contest.

Corruption has also become one of the main causes of social discontent, especially in the countryside, where villagers can find themselves the victims of corrupt land deals and unethical behaviour by local government officials.

天高皇帝遠 (the sky is high and the emperor is far away)

The only effective way to combat graft and corruption in such a large country like China is to allow for greater transparency of government activities and grant more freedom to the media, which would serve as the watchdogs of society. The CCP must get to the core of the problem, which is in essence, itself. Since the market reforms of the late 1970s, the CCP has been trying desperately to maintain its communist facade in order to retain its legitimacy. For example, one communist trait the CCP has managed to preserve is the lack of proper incentives in place to motivate good behavior from its civil servants.

As a result, Comrade Hu Jintao, the paramount leader of the PRC has a basic annual salary of merely 48,000 RMB ($6,206.37). Without saying, government officials also receive many benefits and perks that come with their positions, but what happens after they retire? Therefore, unwilling to leave their life of privilege behind, many officials would try to make the most of their powers to accumulate graft. Under such a system, corruption isn’t just an isolated social problem, it’s a way of life.

China’s veto of any Taiwanese participation in the U.N. World Health Organization leaves a dangerous gap in the global network as it faces the threat of bird flu and other diseases, Taiwan’s medical authorities said on Monday.

Taiwan has unsuccessfully sought observer status in the WHO for 10 years, but has been rejected as a result of China’s insistence that only sovereign states should be allowed to take part. China claims sovereignty over the self-ruled island.

“This is a human security issue — a human rights issue,” said Wu Shuh-min, who heads a group of doctors and lawmakers touring the United States and Canada this week to seek support for Taiwan’s 2007 bid to join the WHO.

“With the avian flu threatening the international community, we ought to fight those diseases together, instead of having a hole in the network,” said Wu, president of the Foundation of Medical Professionals Alliance in Taiwan…

Last May, the WHO rejected for the 10th consecutive year Taiwan’s bid for observer status at its annual assembly. Chinese pressure to isolate Taiwan often takes “ridiculous” forms, such as insisting that hosts add the word “China” to the names of groups from Taiwan when they appear at professional medical gatherings, said David Huang of the Academia Sinica Institute of European and American Studies. Chinese pressure means that even when Taiwan’s doctors get invited to less controversial, non-U.N. gatherings, “more often than not, we find it’s too late or we cannot find a way to get into the conference room because China blocks us,” he said.

Wu said his hospital in Taiwan lost two nurses among six infected with SARS when that respiratory disease hit China and its neighbors in 2003. Taiwan received no WHO help in controlling that mysterious infection, he said. “We went through tremendous psychological trauma and the whole society was in a panic state,” Wu said.

With such attitudes from the PRC government, one can easily see why a growing number of Taiwanese are so adamant about declaring independence from the ROC and asserting their Taiwanese identity over their Chinese ancestry.

China announced a new round of charter flights with Taiwan on Monday in an effort to temporarily skirt a ban on direct transport links between the historical rivals.

Eleven Chinese and Taiwanese carriers will fly 42 round trips through April 8 to coincide with the traditional grave sweeping festival, the official Xinhua News Agency said.

Flights will service Taiwan’s capital Taipei and southern metropolis of Kaohsiung, and Beijing, Shanghai, Guangzhou, and Xiamen on the Chinese side. The flights were agreed to last year during negotiations between private aviation associations, required because China refuses to recognize Taiwan’s government or deal with it directly.

Taiwan has banned direct scheduled commercial flights since the sides split amid civil war in 1949, but direct charter flights have been gradually expanding to cater to the needs of Taiwanese residents of the mainland, although they remain confined to major holidays – including last month’s Lunar New Year. The charters are off-limits to non-Taiwanese.

Taiwan’s government is considering an expansion of charters to allow Chinese tourists to fly directly to the island, instead of by way of third countries as they are required to do so now.

Under pressure from the domestic tourist industry, Taiwan has been looking for way to expand the number of Chinese tourists allowed to visit the island each year to 365,000, almost 10 times the current number.

Contrary to the article, the ban on direct flights across the Taiwan Strait is actually a two-way ban by both Taiwan and China. Nowadays, China’s ban on direct flights serves no practical purpose to its security. On the other hand, with China’s growing military strength and its increasing threat to Taiwan, the island has valid reasons to be concerned of its national security if it were to lift its ban on direct flights.

However, the lack of direct flights is taking its toll on Taiwan’s economy by burdening Taiwanese businesses with unnecessary costs, and forcing them to forgo potential opportunities. For example, Cathay Pacific derives roughly 10-20% of its revenues from the Taipei-Hong Kong route, which predominantly serves Taiwanese passengers and cargo flying to and from China in the absence of direct flights. If the bans from both sides were to be lifted, Cathay would no longer hold the competitive advantage and would be forced to give up market share to Taiwan-based airlines such as China Airlines and Eva Airways.

Realistically, even if Taiwan were to lift its ban, there are still many obstacles that must be resolved before direct flights can commence across the Taiwan Strait. Aside from the whole national security issue, the two sides also have to consider how direct flights would be perceived by the international community. For example, would cross strait direct flights be “international” or “domestic” flights? Unsurprisingly, China insists on labeling them as domestic, whereas Taiwan considers them international.

My proposal: Flights going to Taiwan would leave from the domestic terminals of Chinese airports, but arrive at the the international terminal of the Taoyuan International Airport. After their arrival, the passengers would still be required to go through immigration and customs just like any other international flights. Problem solved.

Of course, nothing is ever that simple when it comes to China-Taiwan relations. Everything has a hidden meaning, and almost all the “unofficial” negotiations revolve around minimizing the use of words, images, and symbols that have the potential of being used for propaganda purposes by either side. For example, judging from the picture directly above, which depicts the old exterior design of China Airlines’ aircrafts, would China have allowed the upcoming charter flights across the Taiwan Strait if this design was still in use?

Beginning Jan. 1, China’s companies have been booking their profits under a new accounting regime, based on international accounting standards. It’s estimated some 20,000 staffers from U.S. accounting firms are there, boots on the ground, helping China’s companies scrub their books to bring them up to speed.

But what does this mean for investors, and what can they expect to see?

In an admission rare for China’s historically tight-lipped bureaucrats, Zheng Shaodong, assistant minister of public security, told the government press that China does not have sufficient resources to deal with the mounting number of economic crimes. “Many economic crimes are either not detected or unable to be investigated, and this represents a threat to social harmony,” he said.

Fraud reaches into the lifeblood of China’s economy, its state-run banking sector. The China Banking Regulatory Commission said in 2005 that it had punished 799 staff members of the country’s four biggest state banks after finding they were involved in illegal or unauthorized loans totaling $73 billion, according to government reports.

Another trouble spot is that financial disclosures are so poor, investors can never see trouble coming. And China still puts a stranglehold on post-mortem details about these flame-outs, leaving investors in the dark.

When Euro-Asia Agricultural, a Chinese orchid business, went belly up in 2004, the government would only disclose in official press reports that the company had inflated its revenues. It’s still unclear how exactly the company padded its revenues, since China’s financial authorities have not released further details.

Similarly, within months of China Life Insurance’s huge $3.5 billion initial public offering in 2004, state auditors found $652 million worth of irregularities, according to official press reports. Government auditors will only say the irregularities involved “inappropriate competitive problems” and “inappropriate” use of premium funds, including loans and investments. It also found that millions of yuan had been placed into “little treasuries,” which are off-book accounts used to distribute bonuses…

Moreover, loopholes are already being written into the new disclosure statutes. China’s state-owned companies have been exempted from having to disclose related-party deals, endemic in China. Related-party deals usually equate to shareholder capital wasted on insider cronyism for such items as company loans, real estate or consulting deals.

Donald Straszheim, former chief economist at Merrill Lynch and now vice chairman of Roth Capital Partners, recently noted in a report that investors will be effectively shipping money to China’s government without any disclosure on the deals. That might be reason enough to stay away. Both Shanghai and Shenzhen “were launched 15 years ago not as a place where sources of capital and uses of capital could meet, but rather as a way for the state to attract outside investors, thereby increasing the value of the existing government stake in those companies,” Straszheim says. Besides related-party deals, Chinese corporations are still struggling to account for basic line items. “In terms of profits, returns and other indicators, 70% of listed companies on the mainland do not meet international standards,” Cheng Siwei, vice-chairman of the National People’s Congress, warned investors at a Financial Times China-Middle East summit in Dubai earlier this year.

China’s “socialism with Chinese characteristics” has fared well over the past 29 years, but what will become of China’s predominantly state-led capitalism in the years to come without inspired investor confidence in the accounting profession?

More people in Taiwan feel the inhabitants of Mainland China should not have a say in the island’s potential claim for independence, according to a poll by Taiwan Thinktank. 79.5 per cent of respondents think Taiwan’s eventual decision on sovereignty belongs to the 23 million people of Taiwan exclusively, up 3.4 points since January.

Taiwan was formed in 1949 after the government of Chiang Kai-shek was forced out of China as Mao Zedong’s communists were gaining prominence. To this date, Mainland China considers Taiwan a “renegade province” and reserves the right to bring it under control.

In March 2005, legislators in China’s National People’s Congress passed the anti-secession law, which aims to prevent Taiwan’s independence. The legislation calls for the use of “non-peaceful means and other necessary measures to protect China’s sovereignty and territorial integrity.”

Adopted in 1991 by the executive branch of the Taiwanese government, the National Unification Guidelines were a proposed three-step process aimed at eventually reintegrating the two states of Taiwan and China. In February 2006, Taiwanese president Chen Shui-bian announced that the guidelines would “cease to apply.” Chen’s Democratic Progressive Party (DPP) openly advocates for Taiwan to declare its formal independence.

DPP member Su Tseng-Chang took over as Taiwan’s premier in January 2006. On Mar. 14, Su accused the opposition Kuomintang Nationalist Party (KMT) of not caring enough for the island’s independence from China, declaring, “The biggest difference between KMT and DPP candidates is we insist on Taiwan’s identity. We will always emphasize Taiwan’s sovereignty and national security.”

Chiang Kai-Shek may once have been revered as a near-god on Taiwan, where he led his Chinese Nationalist regime after being defeated by Mao Zedong’s Communists on the mainland in 1949. But almost a third of a century after his death, the memory of the old dictator is being effaced, with the removal of the generalissimo’s statues and the renaming of many streets and even Taipei’s international airport.

This has provoked a political row, which this week engulfed Taiwan’s defence minister, Lee Jye. He was expelled from the Kuomintang (KMT), Chiang’s former ruling party, for allowing statues of the old nationalist to be removed from Taiwan’s military bases. Chiang’s legacy has never been properly examined in Taiwan. Arguments about the past are also fights over what the island should be in the future: a part of China (the view of Chiang Kai-shek and his political heirs), or an independent nation with a distinct, non-Chinese Taiwanese identity.

The current government of President Chen Shui-bian, whose Democratic Progressive Party (DPP) leans towards independence (but which appointed a KMT man as defence minister), intensified its campaign against the generalissimo as the island marked the 60th anniversary of the “228 Incident”—the KMT‘s violent suppression of protests against its rule on February 28th 1947. An estimated 28,000 were killed.

Blaming the massacres on Chiang and the “outside” regime of the KMT, the DPP announced plans to rename the giant Chiang Kai-shek Memorial Hall in Taipei as the “Taiwan Democracy Memorial Hall”, and tear down the sanctuary’s perimeter wall. The central government dropped “China” from the names of many state enterprises last month. There is talk of removing Chiang’s portrait from Taiwanese coins…

The government should leave the CKS Memorial as it is. The man should no longer be revered as a god. However, regardless of how we decide to evaluate his 26-year reign, Chiang is already and will forever remain an integral part of Taiwan’s history.